Hi,
Quick question, how can a diversified stock picking strategy be associated with high active risk? I know that active risk will be low, and i fully grasp that part, given a low idiosyncratic risk, however, i have problem wrapping my head around diversified stock picking = high active risk.
Or is the answer as simple as: diversified part related to active risk, while stock picking relates to active share?
Thankful for all assistance 
The more the stocks you add from different sectors to diversify, the more you deviate from benchmark holdings, the higher your active risk.
Typical question: The active share will be high but the active risk may be low.
The more i deviate from benchmark, the higher my active share will be. But this doesnt automatically transfer into a high active risk, right? As i understand it, active risk refer to 1) Factor exposure(s) and 2) Idiosyncratic risk. I assume i can deviate from benchmark without increasing factor exposure, so what it comes down to is whether my idiosyncratic risk has increase or not. And that part (read: Idiosyncratic risk) relates to how diversified my portfolio is.
My question: Have i understood this correctly?
Maybe.
On the other hand, maybe not.
Idiosyncratic risk is the highest when you have a single concentrated position or in case of a poorly diversified folio in turn leading to max active risk. Lets say example your benchmark has sectors a,b,c and your folio too has the same sectors. Say you do some analysis and believe sector d would do quite well and choose to allocate some funds there. That’s active risk for you as its additional risk arising out of your decision to add something not in the benchmark. Also going to think about it, your active risk with the addition of sector d will be attributed to its active share as its not in the benchmark.
Active risk relates to factor exposures your folio has which the benchmark doesn’t have or is significantly more than what the benchmark has.
Would like to know about the maybe not part, if you will.
Active risk means tracking error.
You may choose a number of stocks that are different from those in the benchmark, or a number of weights that are different from those in the benchmark, and discover that you’re still tracking the benchmark return very closely.
It’s not likely, I grant you, but it’s certainly possible.
Aahhh okay. Thank you